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Foreign aid, poverty reduction, and democracy

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  • B. Mak Arvin
  • Francisco Barillas

Abstract

Eradication of poverty is the most pervasive goal of donors' foreign aid programmes. As a result, there has been much research on the degree of correlation between aid and poverty reduction. However, this work to date has shed little light on the direction of causation between the two variables. Using the method of Granger causality, and conditioning aid and poverty on the state of democracy in developing countries, this study asks whether aid flows impact poverty, whether poverty influences aid flows, or whether causality proceeds in both directions simultaneously. While the results identify no causal relationships in some of the sub-samples, they point to the existence of a multitude of relationships across others.

Suggested Citation

  • B. Mak Arvin & Francisco Barillas, 2002. "Foreign aid, poverty reduction, and democracy," Applied Economics, Taylor & Francis Journals, vol. 34(17), pages 2151-2156.
  • Handle: RePEc:taf:applec:v:34:y:2002:i:17:p:2151-2156
    DOI: 10.1080/00036840210136718
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    References listed on IDEAS

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    1. Collier, Paul & Dollar, David, 2001. "Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet International Development Goals," World Development, Elsevier, vol. 29(11), pages 1787-1802, November.
    2. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
    3. Burnside, Craig & Dollar, David, 1998. "Aid, the incentive regime, and poverty reduction," Policy Research Working Paper Series 1937, The World Bank.
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    Cited by:

    1. repec:bla:socsci:v:98:y:2017:i:1:p:282-298 is not listed on IDEAS
    2. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "Foreign Aid and Inclusive Development: Updated Evidence from Africa, 2005–2012," Social Science Quarterly, Southwestern Social Science Association, vol. 98(1), pages 282-298, March.
    3. Simplice Asongu, 2016. "Reinventing Foreign Aid For Inclusive And Sustainable Development: Kuznets, Piketty And The Great Policy Reversal," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 736-755, September.
    4. Asongu, Simplice, 2014. "A brief clarification to the questionable economics of foreign aid for inclusive human development," MPRA Paper 64458, University Library of Munich, Germany.
    5. Asongu, Simplice, 2014. "Reinventing foreign aid for inclusive and sustainable development: a survey," MPRA Paper 65300, University Library of Munich, Germany.
    6. Arvin, B. Mak & Kayani, Zafar, 2009. "Donor Motivation of Inter-Temporal Foreign Assistance to Nepal," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 5(1-2), pages 1-10, March.
    7. Ma. Cecilia Calderón & Alberto Chong, 2006. "¿Contribuye la ayuda extranjera a reducir la desigualdad del ingreso?," Research Department Publications 4438, Inter-American Development Bank, Research Department.
    8. Calderón, María Cecilia & Chong, Alberto E. & Gradstein, Mark, 2011. "Foreign Aid, Income Inequality, and Poverty," IDB Publications (Working Papers) 1939, Inter-American Development Bank.
    9. Herzer, Dierk & Nunnenkamp, Peter, 2012. "The effect of foreign aid on income inequality: Evidence from panel cointegration," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 245-255.
    10. Asongu Simplice, 2014. "The Evolving Debate on the Effect of Foreign Aid on Corruption and Institutions in Africa," Working Papers of the African Governance and Development Institute. 14/009, African Governance and Development Institute..
    11. Simplice A. Asongu Ph.D & Joseph Nnanna, . "Foreign Aid And Sustainable Inclusive Human Development In Africa," Journal of Economic and Sustainable Growth 2, Office Of The Chief Economist, Development Bank of Nigeria.
    12. repec:pje:journl:article27sumiv is not listed on IDEAS
    13. Lukasz Marc, 2014. "The Causal Links between Aid and Government Expenditures," Tinbergen Institute Discussion Papers 14-012/V, Tinbergen Institute.
    14. repec:dbn:journx:2002 is not listed on IDEAS
    15. B. Mak ARVIN & Zafar KAYANI & Marisa A. SCIGLIANO, 2009. "Environmental Aid and Economic Development in the Third World," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 9(1).
    16. Ma. Cecilia Calderón & Alberto Chong, 2006. "Does Foreign Aid Help Reduce Income Inequality?," Research Department Publications 4437, Inter-American Development Bank, Research Department.

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